FCC Chair Holds Line on Newspaper, Network Mergers

NEW YORK (The Deal) -- Federal Communications Commission Chairman Tom Wheeler wants to retain restrictions on broadcasters' ability to own daily newspapers in their markets and to continue barring mergers between the top four broadcast television networks.

Wheeler's plans were discussed by senior FCC officials during a conference call with reporters. The staffers unveiled his plans to kick off the commission's 2014 review of its media ownership rules at the agency's next open meeting, which last week was moved to March 31 from March 19.

Proposals to retain the existing cross-ownership and network ownership rules will be included in the review, which under federal law the FCC must conduct every four years. The FCC's 2010 review did not result in rule changes because then-Chairman Julius Genachowski could not muster the votes needed to pass his plan.

At the March 31 meeting the FCC will also consider Wheeler's plan to impose tough new restrictions on business partnerships that broadcasters have used to sidestep a rule barring them from owning more than one TV station in a market. Thursday, the FCC staffers confirmed that the commissioners will address restrictions on joint sales and shared services agreements between broadcasters. Under JSAs, the larger station group helps the junior partner sell advertising time. Under an SSA, the junior partner receives technical or back office support from the larger station.

The Department of Justice has backed Wheeler's plan to rein in JSAs and SSAs. The DOJ in a filing to the FCC said the practices could allow the senior partner in the agreements to exercise de facto control of the junior partner.

If approved by Wheeler's colleagues, which is likely because agency chairmen rarely bring important matters to a vote unless they are likely to pass, the new restrictions would put a damper on a strategy used by some leading TV station groups. Sinclair Broadcast Group (SBGI),Nexstar Broadcasting Group (NXST),Gray Television (GTN),LIN Television, Gannett (GCI) and others have entered JSAs or SSAs with other broadcasters in their markets as a way of being involved in operations of an additional station in individual markets.

FCC rules prohibit ownership of two stations in a market unless at least eight stations will be held by different owners. That effectively bars TV duopolies in all but the largest markets. In markets where duopolies are permitted, only one of the stations in the pair may be among the four top-rated.

Under Wheeler's proposed changes, any station owner that sells 15% or more of the advertising time in another owner's station through a JSA would have to count that station toward its tally of properties in that market. He also wants to forbid the creation of more JSAs that violate ownership rules and require existing ones to be terminated after two years.

The fate of SSAs will be subject to public comment, but the chairman's tentative approach would be to limit or eliminate SSAs too. How waivers would be granted to existing JSAs that produce a threshold amount of local news and that include minority ownership is unclear.

The network merger restriction prevents mergers between ABC, CBS, NBC and Fox and has not been subject to much controversy.

Regarding the FCC's newspaper cross-ownership restrictions, current rules permit common ownership of newspapers and TV stations in the top 20 markets if the TV station is not ranked among the top four stations in the market, and at least eight independent "major media voices" remain after the combination. Common ownership of newspapers and radio stations is generally permitted in top 20 markets.

In smaller markets, common ownership between newspapers and broadcast outlets is generally barred unless the proposed combination generates at least seven hours a week of additional local news programming or "the newspaper and broadcast outlet qualifies as failed or failing."

The FCC has restricted local broadcast and newspaper cross-ownership since 1975 but almost two dozen waivers have been granted. Broadcasters and newspaper owners have long opposed the restrictions but have stepped up their campaign to eliminate the restrictions as newspaper profits and readership have declined.

Wheeler also is asking his colleagues to support a proposal that would prohibit any of the top four stations in a market from banding together to negotiate terms for carriage of their channels by local cable systems. Cable operators have complained that the practice violates the intent of FCC cable carriage rules and has caused the cost of carriage contracts to skyrocket from $28 million in 2012 to $2.4 billion in 2012, an increase of 8,600%. FCC staffers said those costs are being passed on to consumers in the form of higher monthly cable bills.

Public interest groups opposing media consolidation hailed Wheeler's plans. "Today's announcement begins the process of righting FCC mistakes on media ownership," said Free Press president Craig Aaron. "The agency must close the loopholes in its rules and ensure corporations can't use shell companies to hide the real owners of local stations and sneak through even more media consolidation.

As for the newspaper cross-ownership rule, he said, "keeping these rules in place is a major victory for the broad coalition of public interest, labor and civil rights organizations, as well as millions and millions of Americans, who opposed FCC efforts to allow more media consolidation over the past decade."

Gordon Smith, president of the National Association of Broadcasters' criticized Wheeler's plans, particularly the move to wind down JSAs and SSAs.

"Broadcast companies across America have demonstrated that sharing arrangements lead to more local news and provide robust competition to giant pay TV providers," he said. "The real loser will be local TV viewers, because this proposal will kill jobs, chill investment in broadcasting and reduce meaningful minority programming and ownership opportunities."